Rambus Patent Ruling 'Surprising And Very Negative'

Shares of flash-memory maker
Rambus
fell wider than 9% in heavy trading Tuesday after a federal court judge said the company's award from a patent-infringement case against Hynix Semiconductor was excessive

Hynix was originally ordered to pay Rambus
$306 million in damages after a jury found it guilty of infringing on eight of Rambus' memory-chip patents last April.

But according to Judge Ronald Whyte of the U.S. District Court for the Northern District of California in San Jose, the infringement case against Hynix was not supported by the evidence. Whyte ordered a retrial that could cut Rambus' award by more than half to $133 million.

Daniel Amir, an analyst for W.R. Hambrecht and Company, said the new ruling is "surprising and very negative" for Rambus, since Judge Whyte's decision to continue with the third phase of the trial, which will likely lead to a further delay in settlement talks.

Amir said that after the April ruling, Rambus looked set to gain potential damages of around $1.1 billion, based on the $306 million it won from Hynix.

"With yesterday's ruling which opens the door for a longer process for appeal, we now believe it is unlikely that Rambus will be able to collect such an amount in the near future," Amir wrote in a report to investors Tuesday.

Even though Rambus' business continues to track well, Amir said he is less bullish on the stock now.

Along with the patent-settlement delay, Rambus also faces stock-options backdating allegations and lacks positive near-term growth catalysts, Amir said. As a result, he downgraded the stock to "hold" from "buy."